Kinder Morgan Canadian Expansion Gains

Kinder Morgan (Photo credit: Wikipedia)

Kinder Morgan’s Trans Mountain Expansion Gains Oil Customers 

June 30

Most of the pipeline’s customers, who signed 20-year agreements, are energy companies with major expansion projects under way in the oil sands. Kinder Morgan already moves oil to the west coast on its Trans Mountain network, and has proposed a $4.1-billion expansion.

The energy industry is lobbying hard for pipelines to Canada’s west coast, which would give producers access to Asian customers. This would push up profits because it would create a second market for Canadian crude, rather than relying solely on the United States.

However, while proponents argue the economic angle means access to the west coast should be an urgent priority in Canada, detractors stress this is outweighed by the environmental consequences of potential leaks along the route or a tanker spill in the ocean.

Kinder Morgan, in filing to the National Energy Board related to tolls Friday, said BP PLC, Canadian Oil Sands Ltd., Cenovus Energy Inc., Devon Energy Corp., Husky Energy Inc., Imperial Oil Ltd., Nexen Inc., Statoil ASA, and Tesoro Corp. have backed the pipeline.

Kinder Morgan said it has contracts in place to ship 508,000 barrels of oil per day on the network. After the expansion, Trans Mountain will be able to move 750,000 barrels of oil per day. It wants to leave about 20 per cent of the pipeline available for spot shippers. Trans Mountain’s current capacity is 300,000 barrels of oil per day.

The company asked the NEB to approve the firm shipping agreements it struck with the nine oil companies. Kinder Morgan plans to apply in 2013 for regulatory approval to build the expansion. Trans Mountain spans 1,150 kilometres.

“What this filing today is, is our request [to] the…National Energy Board for approval…of economic and commercial terms that underpin the economic viability of the project,” Ian Anderson, president of Kinder Morgan’s Canadian division, said in a conference call with reporters.

John Kaiser Bottom Fishing : Forecasts An Oil Market Bottom

English: The Bear, Market Place (Photo credit: Wikipedia)

June 29,2012

PINECREST ENERGY (V-PRY) $1.77 +0.24

NEW ZEALAND ENERGY (V-NZ) $1.74 +0.22

RENEGADE PETE. (V-RPL) $2.60 +0.16

DEETHREE EXPLORATION (T-DTX) $3.30 +0.61

TRIOIL RESOURCES (V-TOL) $1.39 +0.05

 

GETTING  BACK –  to Even

 It’s a good day in the markets for a change, but after one of the biggest market crashes in the resource sector we have ever seen, I’m sure the instinct is to sit in cash and horde it…which might still be an idea.

 There is still a lot of nervousness out there and you can tell it in the writing of John Kaiser of the Bottom Fishing Report as he writes, “The

continuing deterioration in the resource sector equity market due to the triple whammy of a Chinese slowdown, the Eurozone crisis, and the Republican need for a worsening US economy to secure an election victory seems to make a very bad and deep bear market tied to a severe global recession

or even thirties style depression inevitable. So inevitable that, without any obvious good reasons, just a contrarian instinct, I think the US economy will in fact be back in an upswing by Q4 of 2012, and powering the global economy away from the abyss.”

 

Kaiser continues, “if I am right, this summer will be the bottom created by capitulation.”

 

But if one did have any aggressive instincts left at all and thought that the world just might continue, we go back to Josef Schachter one of the very, very few people that predicted the collapse in the price of oil. His own scenario is that things don’t get much better through the summer, but

he sees a bottom in the oil sector when we traditionally see that in September/October. Although he seems to dwell on the October figure which is notorious for being a potentially ugly month in the markets. If there is going to be a crisis or a collapse, that tends to be the month.

 

Schachter’s scenario is quite simple…when you go into winter demand for oil and natural gas increases with the colder climate. It’s a boost of almost a million and a half barrels a day and that’s why traditionally, you have the run that time of year in oil and gas stocks.

 Take a look at the chart on Pinecrest Energy over the last three years and it shows you that if you had bought that stock in the fall (around October-ish) and sold it every February, you would have done well.

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Smartphone Sales Channel Checks – update

Image via CrunchBase

June 29,2012

Apple (AAPL : NASDAQ : US$569.05)

Nokia (NOK : NYSE : US$2.11)

Research In Motion* (RIMM : NASDAQ : US$9.13)

Canaccord Genuity Technology  June channel checks indicated similar trends with May levels, and mixed overall global sales suggest only slight smartphone unit growth for the June quarter versus the March quarter.

Global checks indicated modestly improving smartphone sales in Asia offset by continued soft smartphone sales levels in Europe and the U.S. market. The iPhone 4S remained the top selling smartphone in the U.S. market despite gradual share losses at each carrier with the iPhone 4S now over eight months old. Globally sales for the iPhone were solid, aided by increasing promotions in certain markets.

 However, the checks indicated Samsung and HTC led overall Android smartphones in gaining share from the iPhone during June due to initial strong sales of the Samsung Galaxy S III in Europe and the HTC One series at Sprint (S)  and T-Mobile in the U.S. Global sales trends remained very weak for both RIM and Nokia.

While the Lumia 900 initially sold well at AT&T (T) , the HTC One X has passed the Lumia for second-best-selling smartphones behind the iPhone. Also, the recently launched Samsung Galaxy S III products have taken increased share from RIM and Nokia in Europe, as both companies continue to struggle in this market.

 

 

 

 

Oil Forecasts – Update Brent to $114

Brent crude oil price (Photo credit: HM Treasury)

 

June 29, 2012

According to a Bloomberg article, Brent crude, a close runner up for the worst performer from April and June on the Standard & Poor GSCI commodity index, is set to recover from its worst quarter since 2008 as a European Union ban on Iranian oil takes effect, central banks act to protect growth and on speculation OPEC will curb some of its excess supply.

.As of Wednesday’s June 26 close, Brent had lost 24% in the quarter through yesterday to $93.50, (dipped as low as $88.49 last week) its steepest slide since the 54% retreat in the last three months of 2008. Only cotton fell more among the 24 commodities in the GSCI index, tumbling 27%. This wicked sell-off has inspired some analysts to forecast a bottom of $65, however if you look to consensus expectations, the outlook is far less bleak.

Brent is forecast to rebound to an average $114.50 a barrel in the Q3, according to the median estimate of 32 analysts tracked by Bloomberg. BNP Paribas SA, Deutsche Bank AG and Barclays Plc predict $110, $115 and $121, respectively. The article quotes a Deutsche Bank’s head of commodities research in London as saying,

“We do look for a rebound and feel that the oil price has gone beyond economic fundamentals,” He goes on to say, “We are in quite an extreme level of investor pessimism, which would only seem to us justified if the U.S. was going back into a recession.” A rebound in Q3 does seem possible as the EU, Iran’s biggest buyer after China, is due to stop importing the nation’s oil July 1.

Further, OPEC, responsible for 40% of global supplies, resolved to constrain output at a June 14 meeting in Vienna because of “mounting” downside risks to the global economy and accumulating inventories.

 Separately, Bernstein upgraded its energy stance to overweight, after being at market weight for 15 months, saying the recent pullback in oil prices “marks the start of the next oil price up-cycle.” The firm believes downside in oil prices, and energy stocks is now limited as LT, supply/demand fundamentals point to tighter oil markets

Mitel – Analyst Day Updates Target $6.00

 

Mitel Phone – Front (Photo credit: ThinGuy)

Mitel Networks

MITL : NASDAQ : US$4.41 | US$247.4M | Buy , Target US$6.00

Investment recommendation

Mitel held its analyst day in Toronto  June 28 coincident with its TSX cross listing.   BUY rating as we expect the company to harvest benefits from its new channel structure and we believe new products could drive upside to the target model.

Key areas of focus included traction in its new US channel structure, leadership in virtualized UC and voice applications, and new hosted and video collaboration products helping it address expanded markets. The company reiterated its long-term (three-year) target model.

Investment highlights

Mitel management provided detailed presentations on the product portfolios and growth drivers for the Mitel Communication Solutions and Mitel Network Solutions business segments. They provided metrics and examples to highlight the revenue growth driven by their hybrid direct touch channel model in North America. The new channel structure has eliminated channel conflict and has helped drive larger deal sizes.

Management reiterated their long term target model of 5-8% revenue growth for MCS, with gross margins of 57-59% and opex of 30-32%. They expect Mitel Network Solutions to grow 5-7%, with gross margins of 48-49% and opex of 22-23%.

Valuation

MITL’s price target of $6 is 5x our C2013 EPS estimate of $1.30.

 

 

 

Gold Pause – Before Next Move ( Reuters Story)

English: Various Euro bills. (Photo credit: Wikipedia)

June 29

LONDON (Reuters) – Gold prices rose on Friday along with the euro after leaders at a European Union summit struck a deal to cut borrowing costs for Spain and Italy, but stayed on track for their biggest quarterly drop in eight years after a dire performance in May and June.

The metal has fallen 5.87 percent since the end of March, its worst quarter since the three months to June 2004, as the dollar benefited from safe-haven flows and hopes faded that the Federal Reserve would launch another round of U.S. quantitative easing.

After a widely celebrated eleven-year bull run, which took gold prices to a record $1,920.30 an ounce last September, it is now little better than flat on the year and has averaged just over $1,650 an ounce in the first half.

“After 11 years it is only natural that gold stops and pauses for breath before taking the next step higher,” Saxo Bank vice president Ole Hansen said. “The worry is obviously that momentum has been completely lost and leveraged players (such a hedge funds) have left the building.”

“They will come back, but the market needs to reassert itself before that happens, as they are more followers than instigators of trends.”

“The event that could trigger the spark that put some life back into gold is however difficult to find at the moment, so before we move higher, there is a risk that we need to clear the table which could be triggered by a move below $1,500.”

Spot gold was up 1.3 percent at $1,570.20 an ounce at 1003 GMT, while U.S. gold futures for August delivery were up $20.20 an ounce at $1,570.60.

Financial markets have rebounded strongly from Thursday’s losses. The Euro STOXX 50 volatility index, Europe’s main gauge of anxiety, sank 10 percent to a one-week low of 25.25 as investors’ appetite for risky assets recovered following a deal at the EU summit.

Euro zone leaders agreed to take emergency action to bring down Italy’s and Spain’s spiralling borrowing costs and to create a single supervisory body for euro zone banks by the end of this year, a first step towards a European banking union.

Physical gold buying in major consumer India picked up a little on Friday as prices fell. Weakness in Indian demand has undermined spot prices this year, with Indian gold prices currently near record highs due to rupee weakness.

Traders in India are waiting for monsoon rains to pick up, which is vital to farm productivity and profits. Rural areas contribute to about 60 percent of gold imports.

Quarterly sales of gold American Eagle coins by the U.S. Mint also fell to their lowest in four years at 127,500 ounces, down more than 39 percent from the previous quarter and by more than half year-on-year.

Among other precious metals, silver was up 1.8 percent at $26.82 an ounce.

Its outperformance helped pull the gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, back from its highs of the year to 58.5.

Spot platinum was up 1.5 percent at $1,404.75 an ounce, while spot palladium was up 1.2 percent at $567.57 an ounce. Both metals have fallen to their lowest this year in recent days, at $1,378 and $556 respectively.

“There were no obvious catalysts,” UBS said in a note. “If anything U.S. data prints should have been marginally helpful.”

The Richardson/ Bass Quant forecasts gold at $2000 before 12 months.

Chipolte Mexican Grill – Not So Hot : Analyst Review

English: (Photo credit: Wikipedia)

June 28

Chipotle Mexican Grill (CMG : NYSE : US$391.78)

 

An analyst at Investment Technology Group (ITG) stated that a measurement of sales growth at the casual food chain seems to be slowing. The ITG analyst forecast second-quarter revenue of $700 million, below Wall Street’s consensus of about $707 million.

 The analyst also noted that revenue at restaurants open at least a year seemed to be decelerating – forecasting second-quarter growth between 7-8%, compared to 12.7% in the first quarter and 10% in the same period last year.

ITG also noted that despite its lower-than-consensus sales forecast, it still expects relatively strong growth for the casual food chain. “In our view, Chipotle is still experiencing industry-leading growth, and is still expected to report strong sales at quarter end,” the ITG analyst stated. Chipotle has been a standout among restaurant companies for several years as customers have flocked to the chain, the AP noted. That has made it a darling on Wall Street.

In April, the Denver-based company said its first-quarter net income rose by 35% as more diners visited its restaurants and it benefited from priceincreases. Chipotle, which has more than 1,200 restaurants, plans to add another 155-165 this year.

Belo Sun Mining Corp – Junior Gold AMP AdditionTarget $ 2.00

Pôr do Sol no Belo – Manaus, Brazil (Photo credit: whl.travel)

Belo Sun is a selection in the NEW AMP Gold and Precious Metals Portfolio – October 1 Publication

If you have precious metal stocks you want to see included – email me at jackabass@gmail.com ( Please note  NO OTC or Pink Sheet listings )

BSX : TSX : C$1.24 Speculative Buy , Target C$2.00

THESIS: Uncommon combination of good grades and scale in a stable jurisdiction;

12-month target price of C$2.00 based on 0.9x our 10%/diluted peak NAVPS estimate of US$2.17/share, assuming US$/C$ parity. Belo Sun is currently focused on advancing its 100%-owned Volta Grande gold project in Brazil. Our rating is based on: 

Potentially robust project in a favourable jurisdiction:

 A relatively large, highgrade  

global resource of 5.17 Moz grading 1.74 g/t,

location in a politically stable jurisdiction,

access to grid power, seemingly straightforward metallurgy, and

the potential to produce over 300,000 oz per year could potentially have a favourable impact on project economics at Volta Grande, possibly driving robust returns and  

positioning the company as a compelling M&A target.

 Key de-risking catalysts expected in the near-medium term:

We expect a number of catalysts to de-risk the project over the next 12 months, including the completion of the pre-feasibility study (Q3/12E), potential receipt of the Preliminary Licence (Q4/12E), completion of the Definitive Feasibility Study, and construction decision (Q2/13E).

 Compelling exploration upside potential: Resource growth has been rapid under the current management team, highlighted by a 146% increase in the global resource and a 74% increase in grade in just over two years, and with finding costs averaging only $12/oz. All deposits remain open for expansion along strike and at depth. Regional exploration potential also appears attractive on the company’s extensive landholdings, which cover an area of approximately 181,000 ha extending over the majority of the Tres Palmeiras Greenstone Belt, and include 16 known gold occurrences.

 Attractive valuation with room for re-rating:

 On an EV/oz (total resources) basis, the stock currently trades at US$47/oz, largely in line with the explorer/developer average trading multiple. However, we believe that a premium multiple is warranted based on the low geo-political risk profile and relatively high grades.

 Belo Sun currently trades at 0.44x P/NAV (5%/Spot gold, fully diluted) or 0.29x P/NAV (5%/Spot gold, undiluted) vs. the junior producer average of 0.66x, the difference in our view representing re-rating potential, as the Volta Grande project is de-risked through the feasibility, permitting, and development stages.

 

 

Bellatrix Exploration – Analysts Target $ 9

June’s multi-colored eyes (Photo credit: kakissel)

BELLATRIX EXPLORATION (T-BXE) $2.69 -0.01 

 Analysts Views as at June 26, 2012 

Mason Granger is a fund manager with Sentry Investments and he was featured on BNN June 25. One of his three top picks was Bellatrix Exploration.

There are lots of folks in the business that love and admire the work that Ray Smith and his team at Bellatrix are doing. So what. In this world where oil prices have been pummeled and worries are that Europe is going into a recession of some scale. All oil stocks have been pummeled. Just take one look at the chart of Bellatrix. On BNN Granger suggested that they had been expecting oil to fall off this year because of Europe and also suggested that the Saudi’s have had an influence.

 But now that Brent is down to where it is close to a break-even point for the Saudi’s, he suggests we are in a bottoming process or at least near a bottom.

They are trying to pick stocks these days that have a strong balance sheet and a low-cost structure just in case the bad times persist. But as far as Bellatrix, there were more than a few analysts reports out in the last couple of days on the stock and once again, all are positive.

 Brian Kristjansen at Canaccord writes a feature piece, “Doing More With Less.” He writes, “Bellatrix announced this morning (June 21) that it will be reducing capital spending in 2012 to a range of $140 to $150 million, from the prior $180 million to be more in line with cash flow. Production estimatesc (16,500 to 17,000 BOE/d) and exit rates (19,000 to 19,500 BOE/d) are unchanged, however, given continued Cardium and Notikewin well outperformance.

 The company restarted drilling June 22, with its first rig deployed at Willesden Green targeting the Cardium, and expects to deploy its second rig at Ferrier in the coming days as weather permits. The capital program will be spent drilling 15 (13.6 net) Cardium wells and 2 (1.5 net) Notikewin wells.

  We  would note the previously planned Duvernay vertical is not included, which we view positively as a better return is likely to be had from a Cardium or Notikewin well. The IP30 rate on its first Duvernay well was 5.6 Mmcf/d. The well is believed to only be producing from the heel and will be cleaned out with a coil tubing rig when weather permits. Our focus and positive view of the company remain on the consistent and more economic Cardium and Notikewin inventory.

 Impact: Positive 

 Spending less to achieve the same results is especially positive in volatile times when capital preservation is key. 

We have tempered our Q3/12 outlook as two rigs rather then three are being deployed, reducing our 2012 average (we were previously above guidance) to 17,000 BOE/d from 17,250 BOE/d. The spending reduction brings debt to cash flow to 1.1x/0.8x in 2012/2013 (from 1.4x/0.9x). With exit guidance intact, our 2013 estimates remain unchanged.

 Recommendation:

 Bellatrix remains our WatchList ; we are reiterating our BUY recommendation and increasing our target price to C$9.00 (from C$8.75). Our target remains based on a 5.5x 2013E EV/DACF multiple supplemented by $0.08 of risked Cardium upside. We expect to review our risked upside estimates in the near term, given more production history from the company’s Ferrier block.”

The Duvernay well might have been little more than an expensive science project, more than a real well, and with what’s going on in the world it is probably time to make sure one’s budgets are realistic.

Kevin Shaw of Casimir Capital also has a $9.00 target and one does wonder at some of these targets here in the real world with what’s been going on, we still hope Josef Schachter who had predicted much of this year right (although some of his stocks picks have suffered as well) is correct in that we get past an ugly summer and early fall, oil and much of the world seems to recover.

Again, Schachter is predicting $100 on oil some time next winter.